Healthcare Newsletter

Is my restrictive covenant enforceable?

I really enjoyed the article you wrote for NYSDA News (Protecting Practice Value through Restrictive Covenant). I have been in private practice as a general dentist for about 13 months. When I was looking for a place toward the end of my residency it was difficult to find something non-corporate. The place where I'm currently working seemed great but it had a large radius on the covenant. 30 miles for 1.5 years. It is in a pretty rural area and it did't lock me out of my dream spot so I signed on (he wasn't budging). I was curious if you thought that would hold up to a judge as a reasonable restriction.

Sincerely,Eager to buy and leave this behind.

Answer:

Dear Eager Beaver,

I'm sorry to hear you signed such a vast restriction. To answer your question in an educated fashion I would have to review the covenant and possibly check updated case law in your geographic area, which I would ask to be retained to do. But, for our purposes on the listserv (and I appreciate the question!), lets discuss generally the enforceability of non-competes. As discussed in the NYSDA News article, the enforceability of a non-compete will depend on the area you work in, the legitimacy of an employer's "protection claim" and whether the restriction is "reasonable". 30 miles in any area is pretty broad, and as you have specified you are trained in general dentistry the likelihood of you being prohibited from working as a generalist in the range is not very likely. The issue is you will lose any way you cut it if you challenge the provision because if you ignore and violate the restriction, your "corporate" employer may seek to enforce, and even if you win in court, you will still "lose" because of the cost you will incur freeing yourself from the restriction. LIkewise, if you do not want to risk it and you would like to know prior to breaching whether the provision is enforceable, you would have to seek court intervention by requesting a "declaratory judgement", which is you asking a judge to make a determination the provision is invalid - so essentially you are starting a lawsuit, which will be costly.

One option you have to avoid litigation and practice in the restricted area is to negotiate an out with your employer so that the restriction is voided. You may be able to accomplish that end by making an argument it is unenforceable and possibly paying your way out. While not a great option, doing so may mitigate substantial angst and monetary exposure. This may be your best option...To discuss in greater detail, please feel free to reach out offline.

Next time, don't sign! Or, at the very least, work with your healthcare attorney to negotiate down any overly broad, potentially hazardous restrictions.